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The authors incorporate Keeping-Up-with-the-Joneses (KUJ) preferences into the Blanchard-Yaari (BY) framework and develop, using an AK technology, a model of balanced growth. In this paper, they investigate status preference, demographic, and pension policy shocks. They find that a higher degree of KUJ lowers economic growth, while, in contrast, a decrease in the fertility and mortality rates increase it. In the second part of the paper, they extend the model by incorporating a Pay-As-You-Go (PAYG) pension system with a statutory retirement date. This introduces a life-cycle in human wealth earnings and implies that the growth rate is higher under PAYG. They also consider the implications of an increase in the retirement date under both defined benefit and defined contribution schemes.
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